Method and system for providing financing

ABSTRACT

Methods for financing dealer debt instruments for customers of a dealer are disclosed. One method, among others, an underwriter system that finances a dealer debt instrument based upon at least one of customer information, product information, and transaction information for the dealer debt instrument. The underwriter system may calculate an initial purchase offer, and then adjust the initial purchase offer based at least upon at least one of product information and transaction information. In some situations, the underwriter system may provide a dealer with multiple purchase offers for one debt instrument.

BACKGROUND OF THE INVENTION

Since 1985, the sub-prime automotive finance industry has risen andfallen due to a lack of a disciplined credit policy among publiclytraded finance companies. The model that survived the turbulent times ofthe mid to late 1990's was the basic buy here/pay here self-financingmodel. The success of this model is largely attributed to the dealer'sconcern in structuring the right deal to mitigate risk and improveperformance. Therefore, the dealer became more focused on deal structureand customer attributes in an effort to minimize risk and increase nearterm cash flow. As finance companies began to fail in the late 90's,those dealers who had largely abandoned this strategy and moved upstreamin credit quality and product, migrated back downstream and regained thediscipline that was lost in the overabundance of lending, or simply didnot survive.

The traditional concept of considering the “F & I” department as a majorprofit center moved the emphasis towards upfront funding and ancillaryproduct sales for most franchise and independent auto dealerships. Thismovement was detrimental to the sub-prime industry, and can be cited asbeing a major contributing factor to the downfall of the financialinstitutions that focused on sub-prime during the mid 90's. With creditquality in the country not improving, there still exists a very large(in fact growing) industry for higher risk, sub-prime auto financing.

Today the majority of dealers have two key elements that can allow themto capitalize on this opportunity: 1) access to a growing number ofconsumers with questionable credit history, and 2) access to trade-invehicles at a reasonable acquisition price. However, most dealers arenot capable of entering this market due to the lack of certain resourcesvital to making this type of program a success. Those resources include:the ability to raise and maintain capital to run this product, access toa servicing platform sufficient to provide customer service andcollections for this customer type, and a lack of historical data tosupport underwriting and making credit worthiness decisions.

Thus, a heretofore unaddressed need exists in the industry for, amongother things, a financial product that allows dealers who do not havethe time or the resources necessary to start or grow their own“self-financing” program to enter or expand their penetration in thesub-prime financing industry.

SUMMARY OF THE INVENTION

Embodiments of the present invention can be viewed as underwritingcustomer debt instruments. In this regard, one embodiment of such amethod, among others, can be broadly summarized by the following steps:receiving from the dealer a credit application for a customer topurchase a product sold by the dealer, the credit application includingcustomer information, product information, and transaction information;obtaining a credit report on the customer; determining whether topurchase at least a portion of the debt instrument based upon the creditreport of the customer; and responsive to determining to purchase atleast a portion of the debt instrument, further including the steps of:calculating an initial purchase offer based on the credit report of thecustomer; adjusting the initial purchase offer using at least one of theproduct information and the transaction information; determining whetheran index associated with the adjusted purchase offer falls within apredefined range; and responsive to the index falling within thepredefined range, providing the dealer with the adjusted purchase offer.

Another embodiment can be broadly summarized by the following steps:receiving from a dealer an offer to sell a debt instrument, wherein thedebt instrument is the method used by a customer to purchase a productsold by the dealer; determining whether to purchase at least a portionof the debt instrument based upon a credit report for the customer;determining an initial purchase offer score based upon the credit reportfor the customer; determining a second purchase offer score based uponat least one of product information and transaction information;determining whether the second purchase offer score is within anacceptable range of scores; and providing the dealer with a purchaseoffer for at least a portion of the debt instrument if, and only if, thesecond purchase offer score is within the acceptable range of scores.

Other methods, features, and advantages of the present invention will beor become apparent to one with skill in the art upon examination of thefollowing drawings and detailed description. It is intended that allsuch additional methods, features, and advantages be included withinthis description, be within the scope of the present invention, and beprotected by the accompanying claims.

BRIEF DESCRIPTION OF THE DRAWINGS

Many aspects of the invention can be better understood with reference tothe following drawings. The components in the drawings are notnecessarily to scale, emphasis instead being placed upon clearlyillustrating the principles of the present invention. Moreover, in thedrawings, like reference numerals designate corresponding partsthroughout the several views.

FIG. 1 block diagram illustrating one potential environment forembodiments of the present invention.

FIG. 2. is a block diagram of an underwriter system.

FIG. 3 is one example of a record used by the underwriter system.

FIG. 4 is one example of a record of an account portfolio.

FIG. 5 is a flow chart illustrating one example of the steps taken forpurchasing a debt instrument.

FIG. 6 is a flow chart illustrating one example of the steps taken formanaging an account portfolio.

FIG. 7 is a graph showing an example of one embodiment of the operationfor allocation of funds collected.

DETAILED DESCRIPTION

Embodiments of the present invention are directed towards moving thebuyout of a debt instrument by an underwriter right up to thepoint-of-sale. In general, embodiments of the present invention enable alevel of involvement by a financing company during the negotiationprocess between a potential purchaser and the seller. More specifically,in one embodiment of the invention directed towards the automotiveindustry, a customer and a dealer enter into discussions for thepurchase of a vehicle. As the dealer and customer reach a point ofagreement, the dealer logs onto a system incorporating aspects of thepresent invention to obtain financing options. Once logged into thesystem, the dealer enters three types of information. The informationentered describes various aspects pertaining to the structure of thedeal, including the collateral the capacity or basic qualifications ofthe customer (such as demographic information pertaining to thecustomer) and the credit rating of the customer. The capacity or basicqualifications of the customer includes a variety of informationincluding, but not limited to the living and work history of thecustomer, length of time at current job and residence, financialsituation, gross income, current payments ratio to income, location,frequency of payments, payment methods, use of starter interruptdevices, whether the account is a joint or individual account, whetherACH transfers are enabled or available, etc. All of these elements, aswell as other elements define the capacity of the customer. Thisinformation is used to define a baseline offer that is adjusted upwardsor downwards based on the collateral and the credit worthiness of thecustomer. Thus, if the customer satisfactorily meets the minimumcapacity requirements, they will get an offer but, the offer will befurther adjusted based on other information.

The collateral focuses on the vehicle, including the make, model,mileage, history, condition, etc. The credit worthiness of the customeris determined using a proprietary scoring technique, a commerciallyavailable technique, or a combination of both. Using this information,the system then presents multiple offerings to the dealer, three offersin one embodiment, that vary based on the percentage of the loan thatwill be advanced to the dealer and the share of the future payments thatmay be given to the dealers. The dealer then has the opportunity toreview these offers and select the offer that is desired for theparticular transaction.

Advantageously, embodiments of the present invention thus providemultiple offers to a seller for the financing of a transaction,implement a payment sharing program such that the financer only buys aportion of the loan and, on top of this no fees are accessed for thefinancial instrument.

FIG. 1 is a block diagram illustrating one potential environment forembodiments of the present invention. The illustrated environmentincludes a connected system for a dealer, credit bureau, and anunderwriter. The dealer system 102 is connected to an underwriter system106 via a network 104, and the underwriter system 106 is incommunication with a credit bureau system 108 via the network 104. Thenetwork 104 may be the internet or other network such as a telephonenetwork. In some embodiments, the dealer system 102 and underwritersystem 106 may be in direct communication. Similarly, the underwritersystem 106 may be in direct communication with the credit bureau system108.

In some embodiments, the dealer system 102 may be a computer systemhaving the functionality for, among other things, communicating over thenetwork 104. In other embodiments, the dealer system 102 may becomprised of network communication devices such as terminals. In otherembodiments, the dealer system may be comprised of one or more computerservers with one or more terminals or personal computers networked tothe one or more computer servers.

Among other things, the dealer system 102 may be configured tocommunicate with the network 104, receive input from a dealer 110, andmanage transactions and financial accounts, which may be embodied infinancial records 109. Among other things, the financial records 109 mayinclude unapproved credit applications 116, newly approved debtinstruments 117, and aged debt instruments 118. For the purposes of thisdisclosure an aged debt instrument is a debt instrument having arepayment history, i.e., the debt instrument was approved some time inthe past such that one or more payment due dates have occurred some timein the past. For the purposes of this disclosure, a newly approved debtinstrument is a debt instrument that has been approved but for whichthere is not yet a repayment history, i.e., all of the payment due datesfor the debt instrument are still in the future. For the purposes ofthis disclosure, an unapproved credit application is an application fora credit application that has not yet been approved. Typically, each oneof the unapproved credit applications 116, newly approved debtinstruments 117, and the aged debt instruments 118, will includeinformation such as, but not limited to, customer information, productinformation, and transaction information.

The dealer 110 has an inventory of products 112 that the dealer sells tocustomers 114. For the sake of clarity, the dealer 110 will be describedbelow as a car dealer, and the products 112 will be described below ascars. It should be appreciated that such description is not intended asa limitation and is provided to illustrate one embodiment.

As is well known, many customers 114 either cannot afford to pay cashfor a car 112 or may decide not to pay cash when purchasing a car 112.Consequently, the dealer 110 may provide prospective customers withfinancing to enable the prospective customers to purchase one of thedealer's cars. When a customer 114 applies for financing, the dealer 110uses the dealer system 102 to gather and enter information for obtainingor qualifying for financing. The credit application includes a varietyof information fields for providing customer information, productinformation, credit information and transaction information. The creditapplication is stored in the dealer system 102 as an unapproved creditapplication 116. In some situations, the dealer 110 may decide toapprove an unapproved credit application 116 and decide to underwritethe debt instrument created from the credit application. In othersituations, the dealer may decide to have the underwriter system 106decide whether to approve or disapprove the as of now unapproved creditapplication, and if it is approved, then the underwriter system 106 mayunderwrite the debt instrument created from the newly approved creditapplication. After an unapproved credit application has been approved byeither the dealer or the underwriter system, the unapproved creditapplication becomes a newly approved debt instrument. The newly approveddebt instrument remains in that status until a payment history for thedebt instrument has been created. The payment history for the debtinstrument begins when the customer starts to make payments or on thefirst payment date, which ever comes first. After a payment history forthe debt instrument has been generated, the status of the debtinstrument changes to an aged debt instrument. Typically, aged debtinstruments have payment histories of approximately 6 or more months or6 or more payment periods.

Frequently, the dealer 110 is not in the primary business ofunderwriting debt instruments. Consequently, the dealer 110 may not wantto approve and underwrite debt instruments nor retain the debtinstrument on newly approved debt instruments and aged debt instruments.Thus, the dealer 110 may decide to sell one or more of the debtinstruments, which includes newly approved debt instruments and ageddebt instruments, to the underwriter system 106. The dealer 110 may alsodecide to have the underwriter system 106 decide whether to approve anunapproved credit application, and then if the underwriter system 106approves the unapproved credit application, the dealer may decide tosell the debt instrument created from the credit application.

So as to sell a debt instrument—a newly approved debt instrument, anaged debt instrument, or a debt instrument created from an unapprovedcredit application—the dealer system 102 provides the underwriter systemwith an offer-to-sell 121. The offer-to-sell 121 includes capacity orcustomer information, collateral or product information, and creditinformation. In the case of an aged debt instrument, the offer-to-sellmay also include payment history for the debt instrument.

Among other things, the underwriter system 106 receives theoffer-to-sell 121 from the dealer system 102. The underwriter system isconfigured to process each received offer-to-sell and provide the dealersystem 102 with an offer-to-sell response 120. The offer-to-sellresponse 120 may include notification that the offer-to-sell wasincomplete, e.g., if the offer-to-sell was for a debt instrument createdfrom an unapproved credit application 116, the unapproved creditapplication might have been incomplete. The offer-to-sell response mightinclude a purchase offer from the underwriter system 106. In thepurchase offer, the underwriter system 106 may offer to purchase some,or all, of the debt instrument and may provide various terms forpurchasing the debt instrument. In some embodiments, the underwritersystem 106 may offer to purchase some or all of a debt instrument thatis created from an as of yet unapproved credit application, some or allof a newly approved debt instrument, and/or some or all of an aged debtinstrument. Alternatively, the offer-to-sell response might includenotification that the underwriter system 106 declines to purchase thedebt instrument. For example, the offer-to-sell might have been an offerto sell a debt instrument created from an as of yet unapproved creditapplication, and the offer-to-sell response might include notice thatthe underwriter system 102 refused to purchase the debt instrumentgenerated from the as of yet unapproved credit application. Similarly,the offer-to-sell might have been an offer to sell an aged debtinstrument, and the offer-to-sell response might have been a refusal topurchase the aged debt instrument. The refusal may have been based uponone or more criteria including the payment history of the aged debtinstrument.

Among other things, the underwriter system 106 may parse customerinformation from the offer-to-sell 121 and provide portions of thiscustomer information 122 to a credit bureau system 108.

In some embodiments, the credit bureau system 108 may be comprised of acomputer system having the functionality for, among other things,communicating over the network 104, gathering information related to aperson's credit history, and analyzing the gathered information togenerate a credit score and/or credit report. In other embodiments, thecredit bureau system 108 may be comprised of one or more computerservers and one or more databases having credit related informationstored therein.

The credit bureau system 108 receives the customer information 122 andgenerates a credit report 124 pertaining to the customer 114. Typically,the credit report 124 may include a “credit score” such as a FICO score,created by Fair, Issacs and Company and credit history. Typically, theunderwriter system will use the credit report 124 to process theoffer-to-sell 121. In some embodiments, the underwriter system maysimply utilize information received from the credit bureau system 108 togenerate a credit score using a proprietary technique. In otherembodiments, the utilization of a credit bureau system 108 may beomitted and the underwriter system may generate a credit score directlyfrom the customer information 122 and/or other information accessible tothe underwriter system.

One aspect of the present invention is that the underwriter system 106may provide the dealer 110 with multiple purchase offers for a givenoffer-to-sell 121. The multiple purchase options may provide the dealerwith varying degrees of risk and varying degrees of remuneration forselling a debt instrument. Normally, the greater the amount of risk thatthe dealer is willing to undergo, the greater the potential remunerationfor the dealer. If the dealer is risk adverse, the dealer might select apurchase offer that provides for more money upfront and less money inthe future. On the other hand, the dealer might select a purchase offerthat has less upfront money and greater potential future return. Forinstance, in various embodiments of the present invention, the offersmay differ based on the amount of money the underwriter will advance tothe dealer and the share of the future payments that will be paid to thedealer. In one particular embodiment, the underwriter system providesthree offers to the dealer with an advance rate ranging from 41% to 75%of the amount of the debt instrument with a percentage share of furtherpayments decreasing over that same range.

It should be noted that the underwriter system 106 and the credit bureausystem 108 are normally operated by independent entities. However, insome embodiments, a single entity may provide both underwritingfunctions and credit reporting functions.

FIG. 2 is a schematic diagram illustrating an embodiment of theunderwriter system 106 of FIG. 1. Generally, in terms of hardwarearchitecture, as shown in FIG. 2, underwriter system 106 includesprocessor 202, memory 204 and one or more user input and/or output (I/O)devices 206 (or peripherals) that are communicatively coupled via alocal interface 208.

The local interface 208 can be, for example but is not limited to, oneor more buses or other wired or wireless connections, as is known in theart. The local interface 208 may have additional elements, which areomitted for simplicity, such as controllers, buffers (caches), drivers,repeaters, and receivers, to enable communications. Further, the localinterface 208 may include address, control, and/or data connections toenable appropriate communications among the aforementioned components.

Processor 202 is a hardware device for executing software, particularlythat stored in memory 204. The processor 202 can be any custom made orcommercially available processor, a central processing unit (CPU), anauxiliary processor among several processors associated with theunderwriter system, a semiconductor based microprocessor (in the form ofa microchip or chip set), or generally any device for executing softwareinstructions.

The memory 204 can include any one or combination of volatile memoryelements (e.g., RAM, such as DRAM, SRAM, SDRAM, etc.) and nonvolatilememory elements (e.g., ROM, flash memory, etc.). Moreover, the memory204 may incorporate electronic, magnetic, optical, and/or other types ofstorage media. Note that the memory 204 can have a distributedarchitecture, where various components are situated remote from oneanother, but can be accessed by the processor 202.

The user I/O devices 206 may include input devices, for example but notlimited to, a keyboard, mouse, scanner, microphone, a touch sensitivedisplay etc. Furthermore, the user I/O devices 206 may also includeoutput devices, for example but not limited to, a printer, display, etc.I/O devices may further include devices that communicate both inputs andoutputs, for instance but not limited to, a modulator/demodulator(modem; for accessing another device, system, or network), a radiofrequency (RF) or other transceiver, a telephonic interface, a bridge, arouter, etc. One or more of these communication devices may be includedin a network interface device 210.

Software stored in memory 204 may include one or more separate programs,each one of which comprises an ordered listing of executableinstructions for implementing logical functions. In the example of FIG.2, the software in the memory 204 includes operating system 212 andaccount receivable manager (ARM) module 214. Among other things,operating system 212 essentially controls the execution of ARM module214 and provides scheduling, input-output control, file and datamanagement, memory management, and communication control and relatedservices.

ARM module 214 may be a source program, executable program (objectcode), script, or any other entity comprising a set of instructions tobe performed. When implemented as a source program, ARM module 214 istranslated via a compiler, assembler, interpreter, or the like, whichmay or may not be included within the memory 204, so as to operateproperly in connection with the O/S 212. Furthermore, ARM module 214 canbe written in one or more object oriented programming languages, whichhave classes of data and methods, or procedure programming languages,which have routines, subroutines, and/or functions.

In some embodiments, the underwriter system 106 includes a database 216.The database 216 can include any one or combination of volatile memoryelements (e.g., RAM, such as DRAM, SRAM, SDRAM, etc.) and nonvolatilememory elements (e.g., ROM, flash memory, etc.). Moreover, the database216 may incorporate electronic, magnetic, optical, and/or other types ofstorage media. Note that the database 216 can have a distributedarchitecture, where various components are situated remote from oneanother, but can be accessed by the processor 202.

The ARM module 214 may include an account receivable purchaser (ARP)module 218 and an account receivable portfolio manager (ARPM) module220. The ARP module 218 may be configured to receive and process, amongother things, the received offer-to-sell 121. To process a givenoffer-to-sell 121, the ARP module 218 may, among other things, parseinformation such the customer information from the offer-to-sell 121 andprovide the customer information 122, among other information, to thecredit bureau system 108. The ARP module 218 may be configured toreceive the credit report 124 from the credit bureau system 108 andfurther process the offer-to-sell 121 using information contained in thecredit report 124. When the offer-to-sell 121 was for a newly approveddebt instrument 117 or an aged debt instrument 118, further processingof the offer-to-sell 121 by the ARP module 218 may be include decidingwhether or not to purchase the debt instrument based upon the creditreport 124. When the offer-to-sell 121 was for an unapproved creditapplication 116, further processing of the offer-to-sell 121 by the ARPmodule 218 may be include deciding whether or not to approve the creditapplication and whether or not to purchase the debt instrument createdfrom the credit application. For credit applications, the ARP module maydecide whether to approve the credit application and purchase theensuing debt instrument based upon the credit report 124.

Upon deciding to purchase a debt instrument, the ARP module 218 maygenerate an initial purchase offer. In one embodiment, the initialpurchase offer is primarily based on the capacity information pertainingto the customer. This information is reviewed and compared againstdesired values to generate the initial offer. After generating aninitial purchase offer, the ARP module 218 may use information includedin the offer-to-sell 121 to adjust or refine the initial purchase offerand generate therefrom one or more purchase offers. In some situations,in the process of adjusting or refining the initial purchase offer, theARP module 218 may decide not to purchase the debt instrument associatedwith the offer-to-sell 121. Among other things, the ARP module 218 mayuse product information and/or credit information to adjust the initialpurchase offers. As a non-limiting example, product information mayinclude make of car, model and trim of car, mileage of car, appraisedvalue of car, VIN of car, color, options, etc., and credit informationmay include report information received from a credit bureau, aproprietarily generated credit score or a combination of both. Otherinformation may also come into play such as the amount of down payment,number of payments and/or term of debt instrument, interest rate of debtinstrument, amount of debt instrument, etc. After generating at leastone purchase offer, or after having decided not to generate a purchaseoffer—to have decided to decline purchasing the debt instrumentassociated with offer-to-sell 121—the ARP module 218 may generate thecredit application response 120 and provide the credit applicationresponse 120 to the dealer system 102.

Assuming that the ARP module 218 generated multiple purchase offers, thedealer 110 may use the dealer system 102 to select a particular purchaseoffer from the multiple purchase offers. Typically, each of the purchaseoffers includes purchase offer parameters, which the ARP module 218 canset. Non-limiting examples of purchase offer parameters include “advancepayment” and “future payment.” For the purposes of this disclosure anadvance payment for a given purchase offer is defined as the amount ofmoney that the dealer receives when the dealer sells a debt instrument,and for the purposes of this disclosure a future payment is defined asthe amount of money that the dealer is projected to receive in thefuture. In some embodiments, the ARP module 218 may calculate offerparameters such as the advance payment and future payment in fractionalterms, e.g., the fraction that the dealer receives (or is projected toreceive) over a given denominator. The given denominator might be thetotal amount of the transaction, e.g., debt instrument amount plus downpayment, or amount of the debt instrument, or the projected repaymentamount, e.g., principal plus interest, or some other predefined amount.For the purposes of this disclosure, dealer advance payment rate isdefined as the fraction of the advance payment offered to the dealerdivided by a predefined denominator, and dealer future payment rate isfraction of the amount that the dealer is projected to receive in thefuture divided by a predefined denominator.

The database 216 has multiple account portfolios 222 stored therein. Asingle account portfolio 222 is comprised of multiple debt instrumentsthat have been purchased by the underwriter system 106. When theunderwriter system 106 purchases a debt instrument, the ARM module 218either creates/opens an account portfolio 222 or includes the purchaseddebt instrument in a previously created/opened account portfolio 222.

Among other things, the ARPM module 220 is configured to open and closeaccount portfolios 222 and manage the account portfolios 222. For agiven account portfolio, managing the account portfolio may includedetermining weighted averages for purchase offer parameters of the debtinstruments included in the given account portfolio. As non-limitingexamples, the ARPM 220 may calculate a weighted advance payment rate ora weighted future payment rate. Managing a given account portfolio mayalso include crediting the given account portfolio with funds when apayment for a debt instrument included in the account portfolio isreceived, and maintaining a minimum reserve amount of cash in the givenaccount portfolio.

Among other things, the ARPM module 220 may be configured to monitor theperformance of the account portfolios 222 and to distribute funds to thedealer 110 in accordance with predetermined payout rules. Typically, thepredetermined payout rules define whether the dealer is due a payout,and if so, when the payout is due and the amount of the payout. In someembodiments, the ARPM 220 may be configured to manage the accountportfolios 222 such that there is a reserve amount in the account. For agiven account portfolio, if the funds in the given account portfolioexceed a predetermined reserve amount, then the ARPM 220 may distributea portion of the excess funds to the dealer. Typically, the predefinedpayout rules define the percentage of the excess funds that the dealerreceives.

The ARPM module 220 may also be configured to monitor debt instrumentaccounts. In some embodiments, the ARPM module 220 may be configured toadjust a given portfolio account when a given debt instrument includedin the given portfolio account becomes delinquent. The ARPM module 220may implement predefined account management rules when adjusting thegiven portfolio account. The predefined account management rules mayprovide the dealer with the first right of refusal to handle customerrepossessions and asset disposal (via auction or resell). In someembodiments, in the event that a customer defaults on his or her debtinstrument, the ARPM module 220 may provide the dealer the followingoptions:

-   -   1. Waive interest accrued on payoff balance from date of last        payment;    -   2. Apply the reserve accumulated since the date of debt        instrument on the individual asset being repossessed;    -   3. Allow the dealer to pay a predetermined amount to re-purchase        the debt instrument, and thereby gain the right to repossess the        product; and    -   4. Allow the dealer to re-purchase the debt instrument by paying        a percentage of the amount due on the debt instrument, and        thereby gaining the right to repossess the product.

It should be noted that the ARPM module 220 may be configured to closeor lock an account portfolio 222 based on a variety of factors. Forexample, the ARPM module 220 may be configured to close or lock anaccount portfolio 222 based on criteria such as, but not limited to, thetime of month (e.g., close or lock an account portfolio at the beginningor ending of a month) and/or capitalization (e.g., close or lock anaccount portfolio when the value of the underwritten debt instrumentsreach a predetermined value).

Once a portfolio is “closed,” the ARPM module 220 may begin to create ahistory file and a dealer report on the account portfolio. The longerthe account portfolio takes to close, the shorter the average remainingmaturity. The ARPM module 220 may provide the dealer with an option tohave a larger account portfolio value in an effort to simplifyreporting.

The ARPM module 220 may provide a one-page portfolio summary in a“scorecard” format. This format will also provide the dealer with agraphical performance indicator as to how account portfolio isperforming relative to expectation. In some embodiments, the reports maybe dynamically generated, and the reports may be made available to thedealer at regular intervals via e-mail delivery or a secure web site.

FIG. 3 illustrates an example of a record 300. The record 300 includes acustomer information field 302, a product information field 304, and atransaction information field 306. Non-limiting examples of content thatmay be carried by the customer information field 302 may include thecustomer's name, the customer's address, the customer's date of birth,the customer's social security number, and the customer's employmenthistory, which may include current employer, occupation and income andprevious employers, occupations, and incomes, and dates of employment,addresses of employers, length of employment, etc., finance history andstatus including debt to earning ratios, payment history and patterns,as well as other information. In some embodiments, the customerinformation field 302 may include more information or less information.For example, in one embodiment, the customer information field 302 mayinclude, but is not limited to, other financial information such as thecustomer's bank account (if any), the customer's credit accounts (ifany), the customer's debts (if any), the customer's obligations such asalimony/child support (if any), etc.

The collateral or product information field 304 carries informationrelated to the product for which a customer takes out a debt instrumentto purchase the product. In the case of a car, the product informationfield 304 may include information such as, but not limited to, themanufacturer of the car, the model and trim of the car, the year of thecar, the Vehicle Identification Number of the car, the mileage of thecar, etc.

The transaction information field 306 carries information related to thedebt instrument used by the customer to purchase the product. In thecase of a car, the transaction information field 304 may includeinformation such as, but not limited to, the sale price of the car, thedown payment by the customer, the dealer's cost of the car, the debtinstrument amount, the term of the debt instrument, the outstandingbalance of the debt instrument, the interest rate of the debtinstrument, the number of payments made, the total number of paymentsover the term of the debt instrument, the number of payments still due,the status of the debt instrument—current, overdue, delinquent, paid infull, etc.—and an identifier such as a debt instrument/account number.

The information carried in the record 300 can be provided to theunderwriter system 106 via the offer-to-sell 121. The ARP module 218 mayuse the information in the record 300 to determine whether or not topurchase a debt instrument associated with the offer-to-sell 121. If theARP module 218 decides to purchase the debt instrument, the informationin the record 300 may be used determine the terms of an offer topurchase the debt instrument or aged debt instrument.

FIG. 4 illustrates information that may be carried in an accountportfolio 222. The account portfolio 222 includes a portfolio identifierfield 402, dealer identifier field 404, portfolio status field 406,receivables field 408, dealer apportionment field 410, and portfolioperformance field 412. Typically, the ARPM module 220 manages multipleaccount portfolios 222, and each one of the multiple account portfolios222 has a unique identifier, which is carried in the portfolioidentifier field 402.

In some embodiments, the underwriter system 106 may purchase debtinstruments from multiple dealers. In that case, each of the dealers isassigned an identifier. The dealer identifier field 404 carries theidentifier of the dealer that is associated with the account portfolio.

The portfolio status field 406 carries the current status of the accountportfolio. Among others, the current status of the account portfolio maybe “open,” in which case more debt instrument may be added to theaccount portfolio, or “closed,” in which case no new debt instrumentsmay be added to the account portfolio.

The receivables field 408 may carry information identifying each of thedebt instruments that comprise the account portfolio. The dealerapportionment field 410 may carry information for determining the amountof funds to be distributed to the dealer. For example, the dealerapportionment field 410 may carry weighted averages such as, but notlimited to, weighted future payment rate. The weighted future paymentrate is based upon a weighted average of the future payment rates forthe debt instruments that comprise the portfolio. In some embodiments,funds distributed to the dealer may be related to the weighted futurepayment rate.

The portfolio performance field 412 may also include information relatedto the performance of the portfolio. Non-limiting examples ofinformation that may be included in the portfolio performance field 412includes the total funds received, total outstanding balance of theportfolio, the current value of the portfolio, amount of funds remittedto the dealer, and the minimum reserve for portfolio i.e., the amount ofmoney held in reserve by the underwriter system during the life of theportfolio account. The portfolio performance field 412 may also includeinformation related to delinquent debt instruments.

FIG. 5 is an one example of a flow chart illustrating steps that may beperformed by the underwriter system. In step 502, the underwriter systemreceives an offer to sell a debt instrument. The debt instrument that isbeing offered for sale may be an aged debt instrument, i.e., a debtinstrument with a repayment history, or a new debt instrument, whichdoes not yet have a repayment history or has a short repayment history,or a prospective debt instrument that has not yet been approved. Theoffer to sell includes customer information that is parsed from theoffer to sell. The customer information identifies a customer, and instep 504A, the underwriter system examines the collateral score of thecustomer. If the collateral score is rejected 506A, the processing endsat step 520. Otherwise, processing continues to step 504B where thecredit rating for customer is examined. Typically, the underwritersystem finds the customer's credit rating by providing a credit bureauwith required customer information. However, in some embodiments, theunderwriter system may include the capability for generating thecustomer's credit rating. If the credit rating is rejected 506B, theprocessing ends at step 520. Otherwise, processing continues at step504C where the capacity of the customer is examined. If the capacity ofthe customer is insufficient to avoid rejection, processing ends at step520. Otherwise, processing continues at step 508 where the multipleoffers are calculated.

In step 510, the underwriter system adjusts the initial purchase offer.Among other things, the adjustment to the initial purchase offer may bebased upon the collateral or product information and the credit score ofthe customer. Alternatively or in addition to, the adjustment to theinitial purchase offer may be based on transaction information. In someembodiments, the adjustment to the initial purchase offer may be basedon collateral or product information, the credit score and transactioninformation.

In step 512, the underwriter system 106 calculates multiple purchaseoffers based upon the adjustments to the initial purchase offer.Typically, the multiple purchase offers may have differing amounts ofadvance payment and/or differing amounts of future payment or futurepayment rates. Naturally, advance payment amounts and future paymentamounts may be expressed in fractional terms of advance payment ratesand future payment rates, and in that case, the multiple purchase offersmay have differing advance payment rates and/or differing future paymentrates. Typically, a given purchase offer may include both a futurepayment amount/rate (or an estimated future payment amount/rate) and anadvance payment amount/rate (or estimated advance payment amount/rate,and/or other financial terms.

In step 514, the underwriter system 106 determines whether one or more,or all, of the multiple purchase offers calculated in step 512 should beapproved. For example, a given purchase offer might have a specificfuture payment rate. In determining whether to approve the purchaseoffer, the underwriter system 106 may determine whether the specificfuture payment rate is within a predetermined range of allowable futurepayment rates. Generally, each specific financial term included in agiven purchase offer is checked to determine whether the specificfinancial term falls within a predetermined range, and if so, then thegiven purchase offer is approved. If one or more of the specificfinancial terms included in a given purchase offer do not fall withintheir respective allowable ranges, then the given purchase offer isrejected. In some embodiments, the specific financial terms in a givenpurchase offer may be weighted such that the given purchase offer may beapproved even if one or more of the specific financial terms included inthe given purchase offer are not approvable, i.e., the one or morespecific financial terms are outside of their respective allowableranges. In generality, the specific financial terms of a given purchaseoffer may be considered “offer-parameters,” or indices, and if the“offer parameters”/indices are within predetermined “allowable ranges”then the purchase offer may be approved.

If none of the purchase offers calculated in step 512 are approved, theprocess ends at step 520. On the other hand, if one or more of thecalculated purchase offers are approved, then the process continues atstep 516. In step 516, the underwriter system 106 provides the dealersystem 102 with approved purchase offers all at the same time. Theprovided offers are received and able to be reviewed and selected by thedealer. In step 518, the underwriter system receives the dealer'sselection. The dealer's selection may include specifying which purchaseoffer the dealer has selected or notification that the dealer hasrejected all of the purchase offers by either allowing all offers toexpire or affirmatively rejecting all offers.

In some embodiments, a purchase offer score is assigned to the initialpurchase offer that was calculated in step 508. The purchase offer scoremay be initially based upon the credit rating of the customer. Thepurchase offer score may be related to an advance payment rate for thedealer. In step 510, the purchase offer score may be readjusted basedupon product information and/or transaction information. For example,based upon the product information, which may include vehicle type,mileage on vehicle, year of vehicle, trim of vehicle, etc., the purchaseoffer score may be readjusted up or down by a first predeterminedmaximum amount. Similarly, in step 510, based upon the transactioninformation, which may include sale price, down payment amount, dealercost, debt instrument amount, term of debt instrument, outstandingbalance, interest rate, etc., the purchase offer score may be readjustedup or down by a second predetermined maximum amount.

In some embodiments, in step 512, one or more purchase offers arecalculated based upon the readjusted purchase offer score. For example,if the purchase offer score is related to an advance payment rate forthe dealer, and if the purchase offer score is above a first given valuesuch as X1, then the multiple purchase offers are calculated withdecreasing advance payment rates, which may decrease by a firstpredetermined amount of Y1%. However, assuming that the purchase offerscore is related to the advance payment rate for the dealer and thepurchase offer score is above second predetermined value such as X2,then the multiple purchase offers are calculated with decreasing advancepayment rates, which may decrease by a second predetermined amount ofY2%. And, in step 514, each one of purchase offers is approved ordisapproved, and for a given purchase offer the purchase offer may beapproved or disapproved based upon the advance payment rate contained inthe given purchase offer. If the advance payment rate falls outside of agiven range, the given purchase offer may be disapproved. In someembodiments, the acceptable range of advance payment rates extendsbetween 41% and 75%, approximately.

Referring to FIG. 6, which illustrates one example of the steps taken tomanage an account portfolio, in step 602, after purchasing a debtinstrument from the dealer, the debt instrument is added to an accountportfolio. The ARPM module 220 may be configured to add the debtinstrument to a presently open account portfolio 222 or open a newaccount portfolio.

In step 604, the ARPM module 220 calculates portfolio offer parametersfor the account portfolio. The portfolio offer parameters may includeweighted future payment rates and/or weighted advance payment rates. Theportfolio offer parameters may be used in allocating funds to the dealerassociated with the account portfolio.

In step 606, repayment funds for one of the debt instruments included inthe account portfolio are received. In step 608, the ARPM module 220determines whether a reserve fund of the account portfolio is greaterthan a predetermined reserve amount. Typically, the predeterminedreserve amount has been previously negotiated by an underwriter and thedealer. If the reserve fund of the account portfolio is less than thepredetermined reserve amount, then in step 610, the received funds areadded to a reserve fund of the account portfolio. On the other hand, ifthe reserve funds of the account portfolio are greater than or equal tothe predetermined reserve minimum, then the funds received in step 606are included in a portfolio of distributable funds 612.

In step 614, the ARPM module 220 determines whether any of the debtinstruments included in the portfolio account are delinquent. If so,then in step 616, the ARPM module 220 adjusts the portfolio. Among otherthings, the ARPM module 220 may provide the dealer the followingoptions:

-   -   1. Waive interest accrued on payoff balance from date of last        payment;    -   2. Apply the reserve accumulated since the date of debt        instrument on the individual asset being repossessed;    -   3. Allow the dealer to pay a predetermined amount to re-purchase        the debt instrument, and thereby gain the right to repossess the        product; and    -   4. Allow the dealer to re-purchase the debt instrument by paying        a percentage of the amount due on the debt instrument, and        thereby gaining the right to repossess the product.

In step 618, excess pooled funds, i.e., funds included in the accountportfolio beyond the minimum reserve, are split with the dealer. In someembodiments, the excess funds are split according to the weighted futurepayment rate of the account portfolio.

To further illustrate various aspects of the present invention, aparticular non-limiting example is presented. In the example, aportfolio is established with a fixed value—assumed to be $150,000. Asdebt instruments are purchased by the underwriter, the value of the$150,000 portfolio is decreased by the total value of the debtinstrument. For instance, if the dealer sells a car for $25,000 andreceives a down payment of $5000, then the debt instrument associatedwith that purchase is $20,000 and if the debt instrument is purchased,the portfolio would decrease to $130,000. Thus, a single portfolio willsupport multiple debt instruments. Generally, the portfolios areestablished to support a fixed value.

For each debt instrument or financial transaction that is included inthe portfolio, the debt instrument will include an amount that wasadvanced to the dealer and a percentage of the future payments receivedthat will potentially go to the dealer. The actual value of these twoparameters are selected by the underwriter, which can be comprised of aperson, a system, a model, a group, etc., and presented to the dealer inmultiple packages. Thus, the dealer has the ability to choose the exactvalues from a limited list of values. The packages may all besimultaneously displayed or a subset may be displayed with the abilityto scroll, select, drop down menu, or otherwise access the remainingpackages. Each such package is an actual offer that can be accepted bythe dealer. As a specific example, the dealer may be presented withthree options to select from, with each option having a differentadvance value and a different future payment percentage. Although thedebt instrument is shared between the dealer and the underwriter, theunderwriter actually owns the contract and performs/processes thecollections. In one embodiment, a portfolio value can be selected andthen debt instruments can be purchased up to the portfolio size orwithin a threshold of the portfolio size. In another embodiment, debtinstruments can simply be purchased and then cut off once the aggregatevalue of the debt instruments is equal to a desired value. For instance,if the underwriter opens a $200,000 portfolio, the underwriter canpurchase debt instruments that sum up to this value. Once the funds forthe portfolio are exhausted, the portfolio is closed and anotherportfolio can be opened. However, it will also be appreciated thatmultiple portfolios may be opened at the same time and that additionalportfolios may be opened or initiated at anytime. Each portfolio isindependent—not cross-collateralized. Advantageously, this aspect of thepresent invention helps to alleviate risk on the part of the underwritersince each of the portfolios is separately managed for profitability.

The value of the portfolio is based on the entire amount that isfinanced—including the amounts that are advanced to the dealer. FIG. 7is a graph illustrating the manner in which the portfolio is paid downand the collections are allocated in a specific example of the operationof one embodiment of the present invention. In the illustrated example,the portfolio is initially set at $200,000 and the total amount of fundsadvanced to the dealer is $100,000, or 50% of the portfolio. As paymentsare received for the various debt instruments in the portfolio, thedollars are apportioned based on the percentage allocation of the futurepayments subjected to the maintenance of a reserve. In the variousembodiments, a reserve that is a percentage of the advanced dollars iscollected prior to distributing further funds to the dealer. Forinstance, in the illustrated embodiment, a reserve of 25% of the fundsadvanced to the dealer is shown at the value of $25,000. For eachpayment that is received during a particular period of time, the fundsare allocated to the reserve based on the future payment percentage thatis due the dealer. Assuming for a first debt instrument that the dealerreceives 45% of the future payments, then a $400 payment would result indecreasing the outstanding balance of the dealer advanced amount by $220(55% of $400) and would increase the reserve by $180 (45% of $400). Thisis similarly allocated for each of the debt instruments at theassociated future percentage value for period of time—typically apayment cycle such as a month.

At the end of a payment cycle, the reserve value is recalculated in viewof the collected funds and the current balance of the outstandingadvances. If there are excess funds in the reserve after recalculation,these funds are distributed to the dealer and payments received duringthe next payment cycle will be placed into the reserve. However, if thereserve has not been met, then no payment will be made and the fundswill continue to accumulate over the next cycle into the reserve. Forthe example illustrated in FIG. 7, after the conclusion of the firstpayment cycle PC1, $30,000 has been collected in total. If we assumethat the average of the amount to go to the dealer comes out to 50%,then $15,000 of the $30,000 is allocated to the reserve and the other$15,000 is used to reduce the outstanding advance balance down to$85,000. At the end of the first payment cycle PC1, the reserve value isrecalculated based on the reduction of the outstanding advance balance.In the illustrated example, this reduces the reserve value to $21,250(25% of $85,000). Because the total reserve collected thus far is only$15,000, the threshold has not been reached and thus, there is nodistribution made to the dealer.

During the next payment cycle PC2, assume that the same amount ofpayments are collected, namely $30,000. Again, the average allocationfor these funds is assumed to be 50% for the dealer. Thus, during thesecond payment cycle PC2 the reserve builds up to $30,000 and theoutstanding advance balance is reduced to $70,000. When the reserve isrecalculated based on the outstanding advance balance of $70,000 at theend of second payment cycle, the reserve value is $17,5000. Because thecurrent balance in the reserve fund is $30,000, $12,500 ($30,000 minus$17,500) of this is distributed to the dealer.

During the third payment cycle PC3, the payments are again accumulatedinto the reserve. At the end of the third payment cycle PC3, assumingagain that $30,000 was collected during the payment cycle, the fundspaid out to the dealer at the end of the third payment cycle PC3 isequal to $18,750 (the balance of $32,500 minus the new minimum reserveof $13,750). This process continues until the balance in theadvancements, the total value of the portfolio and the reserve limit allconverge simultaneously at zero. The example provided of course issimplistic and an actual implementation must take other variables intoaccount. For instance, if some of the payments are not collected for agiven period of time, the payments may be written off as bad debt. Inone embodiment of the invention, at the end of the payment cycle thereserve is adjusted to account for bad debt. For instance, at the end ofpayment cycle three in FIG. 7, if $5000 is considered bad debt, then thedealer, rather than receiving $18,750 would only receive $13,750.

Another aspect of the present invention is that embodiments operate toprovide a constant yield to the underwriter. When the underwriterprepares the one or more offers to be sent to the dealer, theunderwriter selects a desired yield or a percentage rate that definesthe underwriter's margin of return. However, the dealer is provided witha level of flexibility in selecting the annualized percentage rate (APR)that is going to be attached to the debt instrument. For instance, theunderwriter establishes a range of interest rates from which the dealercan select. The underwriter identifies a percentage rate floor thatdefines the underwriter's yield. When the offers are presented to thedealer, the dealer can augment the offer to the customer by increasingthe APR attached to the debt instrument. Such an action will result inincreasing the profitability for the dealer but will not have any affecton the underwriter's profitability. Advantageously, this aspect of thepresent invention allows a higher degree of automation in the process.For instance, because the dealer had a range of interest rates fromwhich he can select (i.e., a typical range may be 20 to 22 percent inone embodiment), the dealer does not have to call the underwriter totweak the offers based on a higher or lower interest rate being applied.Because the underwriter receives a constant yield, the dealer canincrease or decrease his profitability by changing the APR. Inapplication, the yield rate can be fixed on a state-wide basis or aregional basis and among other things, may take into consideration legalinterest rates authorized by the governing authorities for the states orregions.

It should be understood that any process descriptions or blocks in flowcharts should be understood as representing modules, segments, orportions of code which include one or more executable instructions forimplementing specific logical functions or steps in the process, andalternate implementations are included within the scope of the preferredembodiment of the present invention in which functions may be executedout of order from that shown or discussed, including substantiallyconcurrently or in reverse order, depending on the functionalityinvolved, as would be understood by those reasonably skilled in the artof the present invention.

It should be emphasized that the above-described embodiments of thepresent invention, particularly, any “preferred” embodiments, are merelypossible examples of implementations, merely set forth for a clearunderstanding of the principles of the invention. Many variations andmodifications may be made to the above-described embodiment(s) of theinvention without departing substantially from the spirit and principlesof the invention. All such modifications and variations are intended tobe included herein within the scope of this disclosure and the presentinvention and protected by the following claims.

Therefore, having thus described the invention, at least the followingis claimed:
 1. A method for providing a financing service, the methodcomprising the steps of: an underwriter computer system receiving from adealer computer system via a communications network an offer-to-sell adebt instrument associated with a dealer financing of a customerpurchase of a product and specifying a down payment and a paymentschedule of future payments, the offer-to-sell comprising informationabout the customer's capacity to make the future payments, collateralfor the debt instrument, and credit worthiness of the customer; theunderwriter computer system determining a credit score based on theinformation in the offer-to-sell received from the dealer; theunderwriter computer system determining to purchase the debt instrumentbased on the credit score and the information in the offer-to-sell; theunderwriter computer system establishing an account portfolio associatedwith the dealer; the underwriter computer system simultaneouslyproviding to the dealer computer system via the communications network aplurality of offers for purchasing the debt instrument from the dealer,each offer including unique purchase offer parameters comprising atleast a unique advancement amount specifying an advance amount to paythe dealer upon acceptance of the offer and a unique sharing percentagespecifying a percentage of the future payments that the underwriter willshare with the dealer from the account portfolio, and each offer isbased at least in part on at least a portion of the information in theoffer-to-sell received from the dealer computer system; the underwritercomputer system receiving from the dealer computer system via thecommunications network an acceptance of one of the plurality of offers;and the underwriter computer system incorporating the debt instrumentand the associated unique purchase offer parameters into the accountportfolio stored in a database, the account portfolio comprising aplurality of previously-purchased debt instruments associated with thedealer, wherein the account portfolio comprises an initial fixed valuewhich is decreased by the value of incorporated debt instruments.
 2. Themethod of claim 1, wherein the offer-to-sell further comprisesdemographic information pertaining to the customer, and the plurality ofoffers for purchasing the debt instrument from the dealer are based onthe demographic information.
 3. The method of claim 2, wherein thedemographic information includes the state of the customer and theplurality of offers comprises a constant yield based on an interest rateidentified for the particular state.
 4. The method of claim 2, whereinthe credit score is determined based on a proprietary algorithm.
 5. Themethod of claim 2, wherein the credit score is based on a credit reportgenerated by a credit bureau.
 6. The method of claim 5, wherein theaccount portfolio is closed when a plurality of financial transactionssumming to a value within a threshold of the portfolio value have beenincorporated.
 7. The method of claim 6, wherein as payments arecollected on the debt instruments in the portfolio, funds areaccumulated to meet a minimum reserve value.
 8. The method of claim 6,wherein as payments are collected on the debt instruments in theportfolio, funds are accumulated to meet a reserve value calculated tobe a percentage of the total amount of advanced funds represented by thedebt instruments in the portfolio.
 9. The method of claim 6, wherein aspayments are collected on the debt instruments in the portfolio, fundsare accumulated to meet a minimum reserve value calculated to be apercentage of the total amount of advanced funds outstanding at the endof a payment cycle and once the reserve is met, allocating funds fromthe reserve to the dealer down to the minimum reserve value.
 10. Themethod of claim 6, wherein as payments are collected on the debtinstruments in the portfolio, funds are accumulated to meet a minimumreserve value calculated to be a percentage of the total amount ofadvanced funds represented by the debt instruments in the portfolio andfurther comprising the steps of: at the end of a payment cycle,recalculating a new minimum reserve value based on the present value ofthe outstanding balance of the advanced funds; if the funds in thereserve exceed the new minimum reserve value, distributing those fundsthat exceed the new minimum reserve value; and if the funds in thereserve do not exceed the new reserve value, continue collectingpayments for the next payment cycle.
 11. The method of claim 6, whereinas payments are collected on the debt instruments in the portfolio,funds are accumulated to meet a reserve value calculated to be apercentage of the total amount of advanced funds represented by the debtinstruments in the portfolio and further comprising the steps of: at theend of a payment cycle, recalculating the reserve value; if the funds inthe reserve exceed the new reserve value, distributing those funds inexcess of the new reserve value; and if the funds in the reserve do notexceed the new reserve value, continue collecting payments for the nextpayment cycle.
 12. A method for providing a financing service, themethod comprising the steps of: an underwriter computer system receivingfrom a dealer computer system via a communications network anoffer-to-sell to an underwriter a debt instrument associated with adealer financing of a customer purchase of a product from the dealer,the debt instrument specifying a down payment and a payment schedule offuture payments, the offer-to-sell comprising information about thecustomer's capacity to make the future payments, collateral for the debtinstrument, credit worthiness of the customer, and a down payment madeto purchase; the underwriter computer system determining a credit scorebased on the information in the offer-to-sell received from the dealer;the underwriter computer system determining to purchase the debtinstrument based on the credit score and the information in theoffer-to-sell; the underwriter computer system simultaneously providingto the dealer computer system via the communications network a pluralityof offers for purchasing the debt instrument from the dealer, each offerincluding unique purchase offer parameters comprising at least a uniqueadvancement amount specifying an advance amount to pay the dealer uponacceptance of the offer by the dealer and a unique sharing percentagespecifying a percentage of the future payments that the underwriter willshare with the dealer from an account portfolio, and each offer is basedat least in part on at least a portion of the information in theoffer-to-sell received from the dealer computer system; the underwritercomputer system receiving from the dealer computer system via thecommunications network an acceptance of one of the plurality of offers;the underwriter computer system incorporating the debt instrument andthe associated unique purchase offer parameters into the accountportfolio stored in a database, the account portfolio comprising aplurality of previously-purchased debt instruments associated with thedealer, wherein the account portfolio comprises an initial fixed valuewhich is decreased by the value of the incorporated debt instruments;receiving the future payments from the customer; and the underwritersharing the future payments with the dealer according to the uniquesharing percentage.